Options and War

[wayneL]

Just some lazy monday lunchtime musings... My client has had major surgery and obviously can't do her appointment today, so sitting here at Bells Rapids, contemplating where I am going to put the nuclear fallout shelter on the property I've just bought, plus other tangental thoughts.

it struck me that running an options portfolio is a little bit like running a war.

There are those cliches regarding the "fog of war" and "the first casualty of war is truth".

Is there any more accurate assessment of the financial markets and in particular, the options thereof, them being nonlinear in their pricing characteristics and subject to the level of fear which applies to any moment in time.

Hedging and exotic strategies often reminds me of mutually assured destruction with peripheral play it perhaps living or dying according to the actions of the whales... And sideing up with the wrong side could mean your demise.

(LTCM anyone)

I mean, who would want to be Poland right now?

Perhaps being Tahiti, though no real prospect of catastrophe or eminent magnificent wealth might be the Goldilocks position.

Survival

 

[StockyGuy]

Interesting analogy - thought-provoking. But bear in mind that many human endeavours have been compared to war. One need only recall the wisdom of Ms Benatar...love...........is a battlefield.

Never being an options trader I take on board your analogy, but I probably always felt a better metaphor for successful options and most types of trading was farming and thus being a farmer of sorts. Short termers and scalpers could maybe be hunters.

 

[ducati916]

Just some lazy monday lunchtime musings... My client has had major surgery and obviously can't do her appointment today, so sitting here at Bells Rapids, contemplating where I am going to put the nuclear fallout shelter on the property I've just bought, plus other tangental thoughts.

it struck me that running an options portfolio is a little bit like running a war.

There are those cliches regarding the "fog of war" and "the first casualty of war is truth".

Is there any more accurate assessment of the financial markets and in particular, the options thereof, them being nonlinear in their pricing characteristics and subject to the level of fear which applies to any moment in time.

Hedging and exotic strategies often reminds me of mutually assured destruction with peripheral play it perhaps living or dying according to the actions of the whales... And sideing up with the wrong side could mean your demise.

(LTCM anyone)

I mean, who would want to be Poland right now?

Perhaps being Tahiti, though no real prospect of catastrophe or eminent magnificent wealth might be the Goldilocks position.

Survival

Certainly in the US, the Options market has greater volume than the stock market. Gamma risk is forcing price movements that might otherwise never have occurred. Truly the tail wagging the dog.

That being said, with the looming liquidity crisis once again threatening severe dislocations, having an Options hedge is a good idea.

This market bust is the one that the can kickers have been trying to avoid for a generation, even longer. Eventually, the fundamentals matter.

jog on
duc